50 Ideas For Increasing Profits and Cost Reduction
Do you want to know 50 great profit building ideas that you can put to immediate use in your business to increase profits and reduce costs?
If yes, read all these ideas that have been implemented by clients and have benefited them giving their businesses emotional raise in profitability. Most ideas can be put to action closest. Each idea has the possible to give you many %points increase in net profits.
Research shows profits increase by 4%-56% and costs reduce by 18%-37% within 2 years using the simple 5 step course of action called the Profit Maps form. Usually a 5% reduction in cost is adequate to turnaround most loss making businesses.
Businesses can calculate the value of the savings by these 2 simple formulas
If the business made a loss
Total Costs and Expenses = sales + absolute value of net loss +/- income tax = say X
Minimum Savings you will make in 2 years = 5% of X (which was calculated above)
If the business made a profit
Total Costs and Expenses = sales + net profit +/- income tax = say Y
Minimum Savings you will make in 2 years = 5% of Y (which was calculated above)
So how much can you save? enhance your profits by?
This category typically contains inflows of resources into the business generated by operations.
Needless to say the profit building course of action can be used to generate marketing and sales ideas. The following ideas were generated with the objective of increasing revenue with little or no impact on the cost structure.
Revenue Increasing Ideas
1. If your company has facilities located over a multi-geographical area you may be able to rent antenna space to cellular phone companies. Typically these companies will pay for the use of rooftops as a place to erect their antennas. Another option is for billboards as advertising if you occupy a central location with a high visibility building. This enhances your revenue without any additional cost you. The point here is to analyze different uses for your facilities. Remember they are assets that can be used 24 hours a day, seven days a week. There are numerous opportunities obtainable for increased revenue if you look for them. Training room and function room facilities can be rented out in the evening or weekends. How about spare land or excess slots you own for public car parking?
2. Determine whether your business can market commission and non-commissioned products as add-on sales. Look for opportunities to sell products to your existing customer base at no additional cost. Examples are catalogue sales to airline passengers and the sale of miscellaneous products to credit card customers. You may have the opportunity to do something similar. Your customers have more value than you realise.
3. Is there any additional value in your customer database? Perhaps your business could generate additional revenue by selling the data. Alternatively consider starting a telemarketing department to market another line of products or sets. Depending on your business and the character of your customer base you may have something great here.
4. analyze the advantages of an effective e-strategy including e-commerce, e-business, e- people and e-technology. There is no question that the new opportunities obtainable by the Internet offer new and inventive ways to increase profits and reduce costs. Consult with an expert in this area including a cross-section of your employees and magic will happen.
5. part your customers into heavy user and light user categories and determine the difference between these two groups. What needs to be done to generate another sale from both categories? All customers are basic. What can you learn about the different types of customers to determine whether more selling occasions possible? Make the most of these customers; you already have them.
6. Develop retention strategies in addition as growth strategies. In today’s markets, it is as important to keep up on to your existing customer base as it to grow your business. It took you a certain amount of resources to attract your customers: you may want to analyze ways to retain a high percentage. What is your cost to acquire a customer? What is your cost to retain a customer? Do your employees know?
7. Continue to look for augmented products and/or sets that would add value without adding expense.
8. analyze opportunities to licence or franchise your business products or sets for additional market proportion or penetration
9. analyze merger and acquisition scenarios where efficiencies would be attained for all businesses concerned.
10. Develop a relationship with a long-distance carrier whereby your company will spread phone cards to your customer base in return for a fee or residual commission.
This category typically contains charges associated with
· Management Pay
· Non-management Pay
· Hourly Wages
· Training Labour
· Overtime Pay
· All Other Pay, Wages and Salary items
Cost Saving Ideas
11. Establish a 45 to 60 hour per week work ecosystem among the managers. Cost structures among your competitors are basically similar to your cost structure so you will acquire an advantage because your managers are working more hours. This assumes that your managers are productive. Managers who have responsibility for a workforce of hourly employees are usually at the facility, a retail outlet, restaurant or office at the minimum this amount of time. Sometimes business quantity is extremely low at early or closing hours. During the slow hours managers can save significantly by scheduling fewer employees and filling it themselves. In addition to the Labour savings, managers will become more knowledgeable about operations and will find ways to enhance customer service, training and operations. I have put this procedure in place in several places. At the beginning there will always be resistance, but once managers get beyond the initial hump things will run smoothly. I also find that certain motive programmes work well here. Get the manager’s incentives based on Labour dollar saved and they come to understand the time of action.
12. Effectively manage your salary administration programs. Many companies pay lip service to this rule but failed to acquire true levels of success in salary administration and management. To start, make sure you have a salary range for every position in the company. Salaries should be structured so that the midpoint is 100, the minimum is 80% and the maximum is 120%. The basic philosophy is that the candidate should be hired into a position between the minimum and the midpoint on the basis of his or her level of experience. The employees are then moved higher in the range on the basis of performance. This philosophy is based on the assumption that mid-point is the amount the position is worth to the company. Employees can acquire an additional 20% by stellar performance. Few employees should be paid over the 120% range. Each job is worth a specific amount to the organisation. If a new hire needs training to become efficient in a particular job, that employee is working at a level below the worth of the position and consequently should be paid at the minimum salary range. When the employee’s performance rises at successful completion of training and can perform 100% of the job duties move the employee quickly toward the midpoint of the salary range.
13. Insist that a salary survey be done every year to ensure that you have achieved the desired community position relative to your competition. In this case the competition is those companies that would recruit your employees. You need to make sure that if you survey 10 competitors; you have a salary range higher than 75% of these companies for your meaningful locaiongs and higher than 50% of these companies for lower-level locaiongs. Implementing this strategy will help you reduce turnover and will also ensure that you are not overpaying for locaiongs.
14. Make sure your salary administration program allows for regular salary review. Typically, this is done once a year for salaried employees and every six months for hourly employees. The review should include a performance appraisal form and the employee’s performance levels should correspond with established pay increases. In other words, establish the pay for your performance review system.
15. Establish a bell curve of salary increases. Let’s say that approximately 8% of your employees are superior performers, 12% are above average, 60% are average, 12% are fair, and 8% are poor. Create a salary increase guideline that mirrors this curve, with the better performing employees receiving higher increases. For example superior employees are given 6% to 7%, above average employees 4% to 5%, average employees 3%, fair employees 2%, and poor employees 0%. This allows the organisation to check and reward performance whilst nevertheless meeting its salary increase budget. clearly, your goal is to continue to aim and develop your workforce. sometimes, low performing employees have to be replaced with those most appropriate to the position. The Bell curve is just a course of action to ensure that star performers are recognised and rewarded for their work.
16. Establish the salary increase guideline budget and stick to it. Plan salary increases for the coming year by using the Bell curve mentioned in the above idea. Department managers should budget salary increases for employees assuming that the next year’s performance will be at the same level as this year’s. Please be aware that some performance ratings will change. There will always be exceptions. This course of action will help ensure that your organisation will keep within the new salary increase budget.
17. The salary increase guideline budget should be preapproved. When a different rating is submitted during the year, treat it as an exception and make sure to justify it because performances can change- it may go up or down. A strict salary administration program will ensure that budgets are achieved.
18. Establish a training rate for all appropriate locaiongs. This is crucial when your organisation experiences higher levels of turnover during the first and second months of employment. The training rate is lower than the standard pay rate and is applicable only during the training period. Employees are given a raise once the training has been completed satisfactorily. Determine whether the training rate could be established for other locaiongs in the organisation.
19. Where the training rate is not appropriate, establish a probationary rate for the standard 90 day period. This rate is lower than the standard pay rate and is applicable only during the first 90 days of employment. If performance is satisfactory, the employee will receive a raise to the standard pay rate. Determine whether a probationary rate could be established for all locaiongs in the organisation.
20. Develop a labour-management system whereby a computer predicts daily or hourly quantity and the amount of labour needs on the basis of seasonality. Most businesses have a trend cycle that can be measured with 15 minute increments. First, you must find a way to get past the concept that your business cannot be tracked this way. There is a pattern to your business. Discovering your business pattern is the first step toward calculating how to manage your Labour cost. Management will give you many reasons why the business cannot be tracked. Once you work by all their concerns, you and your team can clarify those trend items, aspects of your customer behaviour that, in fact, can be tracked and schedule Labour consequently.
21. Determine whether your new hires would qualify for the targeted job tax credit program whereby a percentage of training dollars is refunded by the government.
22. Determine whether your organisation would qualify for tax benefits for providing employee childcare sets.
23. If your employees manager cash transactions, install software pushed cash reconciliation course of action to save time at shift changes and at closing. This will also reduce cash shortages. This kind of procedure also saves time in the cash out course of action.
24. regularly look for software modifications that can reduce labour. Seconds saved could also average dollars earned. Using technology is a natural approach to the whole effort of productivity improvement. If your business has not recently explored this area, effective tools that currently exist may surprise you.
25. Have an industrial engineer estimate your business in terms of time and motion studies to determine whether additional efficiencies can be achieved in areas where high throughput is important. This approach can nevertheless work today. Some managers run their businesses the same way they did 10 or 20 years ago. Time and motion studies can have an impact on cost savings, productivity, customer service, and employee morale.
26. Establish a self-regulating team with the specific responsibility of improving productivity and reducing costs in a particular department or area of the organisation.
27. Develop an motive to reduce absenteeism. This motive should be connected to productivity improvement goals and to the availability of the workforce. It should be based on reducing absenteeism from past period. The incentives could be a vacation bonus based on a 1% reduction in absenteeism
28. Develop a variable pay program whereby management salaries are reduced 5% to 10% across the board and these dollars are set aside into a bonus pool. When there is goal achievement, managers have the possible to earn already higher levels of compensation. However, these dollars will be at risk if managers do not unprotected to profit objectives. The possible to earn already higher levels of compensation will help sell this item.
29. Controlling your staff turnover is another way to reduce operating costs. Implementing strategies throughout the complete human resources cycle to ensure that all systems, procedures, policies, and practices are tight preventing employees from falling by the fractures. I refer to this as the human resources closed loop. If you think about it you will see that there is a cycle to the human resources course of action. It starts with recruitment, interviewing, selection and placement and continues to arrangement, training, salary administration, performance appraisal, development, promotion, and finally termination. Then the cycle begins again. Make sure that all of the areas mentioned are employee friendly and are designed to retain employees. clarify any areas where improvements would reduce the number of employees leaving.
30. In order to determine where are to place additional controls, measure your labour costs in terms of cost per unit, cost per test, cost per guest check, etc. Breaking your labour costs down to the lowest unit will help you better clarify cost saving ideas. It will also make it easier to affect and control.
Other Personnel Costs
This category would typically contains charges associated with
· Applied Payroll Burden
· Superannuation Employers Portion
· Paid Holidays
· Sick Leave
· Short/Long term disability
· Group medical
Cost Saving Ideas
31. Make sure your company has a program that offers all complete-time employees the opportunity to receive a higher salary in lieu of accepting certain benefits (such as medical, dental and life-insurance). Today many employees are being carried on a spouse’s plan. Why not let these employees choose a higher salary instead of benefits? As long as salary increases less than the cost of benefits, the company will save money and employees will increase their income.
32. estimate the cost of your superannuation administration. There are competitive programs that can reduce administrative costs. A simple evaluation of three different companies will determine whether you have an opportunity to realise savings. already if you do not want to change the current superannuation administration you may nevertheless be able to negotiate better terms by showing your evaluation.
33. Reduce workers compensation insurance by aggressively reducing accidents. estimate your workers compensation actual to determine your claims history. Most companies set an actual rate and never re-estimate them already though their experiences change. Depending on your business you may be surprised at the possible savings here.
34. Using the Internet conduct assistance surveys to comply your cost with those of similar organisations.
35. Challenge third-party providers to reduce administration costs by using the Profit Maps form and passing those savings along to you.
36. Continue to monitor workers compensation costs and develop action plans to reduce them.
37. Develop a back to work programme that puts injured employees in different locaiongs. There are times when injured employees want to keep active in the organisation and appropriate locaiongs are obtainable.
38. Negotiate settlements when long-term workers compensation situations dictate.
39. Eliminate alcohol at all company sponsored activities. This approach can prevent accidents, cut beverage costs at roles and reduce risks.
This category typically contains charges associated with
· Long-Distance Telephone
· Cellular Phone
· Data lines
· Fax lines
Cost Saving Ideas
40. Authorise a telecommunications consultant to analyse all your communication costs in terms of rates charged, equipment used, and programmes offered, promotions obtainable, usage, cellular phone options, long-distance carrier performance and pricing, fax and security line combinations, past bills, and so on. Structure the contract so that the consultant bills on the basis of percentage of cost saved or refunds received. In this way, there will be no cost to you if the consultant is not successful in improving your bottom line. Review all areas of communication to ferret out these pockets of expense that often go unnoticed. Pagers and cell phones are usually ordered and distributed without the assistance of an organised plan. There are real and meaningful discounts if you shop around.
41. Continue to renegotiate rates and terms with the vendors who provide sets. Set up an current procedure for regularly renegotiating rates and terms.
42. Monitor and control your communications cost on the basis of the cost per unit test (guests check, or that like) in order to determine locations for exerting any additional control.
In this category typically charges associated are
· Gas and Electricity Usage
Cost Saving Ideas
43. Authorise a utility consultant to analyse your utility costs. Such consultants would know how to deal effectively with the local public service companies in order to discover advantages or missed opportunities associated with gas and electric sets. They should be fully authorised to check existing equipment and records. They should be experienced in developing an index and analyses and creating need graphs to identify situations where you may have been overcharged. They would also represent your issues to the public utility commission.
44. Pay your consultant on the basis of a percentage of the savings associated with his or her action steps. The typical rate is 25% to 30% of the demonstrated savings and refunds over a specific period of time. There should be no charge if savings are not demonstrated.
45. Take energy conservation action steps including setting thermostats at 72°F. Automatic controls should be put in place to control temperature during off hours.
46. Turn off lights in conference rooms, restrooms and officers when they are not in use.
47. Turn off all lights not related to security at the close of business.
This category typically includes charges associated with specialized sets such as
· Legal and Human Resources Related Fees
· Proposals (domestic and international)
· Fees for Technical sets
· Other specialized fees
Cost saving ideas
48. Talk about fees. If your lawyer does not bring up the subject of fees, you should. Do not be shy. In business, lawyers are free to set their own fees. The best time to discuss is at the beginning of a new legal matter.
49. Try to settle situations instead of litigate.
50. Have lawyers design standard forms you can use in routine transactions.